Over 50s life insurance and funeral planning

May 31, 2016

According to a recent news story, the average costof a funeral in the UK today is £3,600. This is double the figure it was ten years ago – and there is little sign of that rate of increase reversing. In fact, the Department for Work and Pensions, the government department responsible for drawing up funeral financial support, is planning a new Bereavement Support Payment for people on low incomes due to the ever-increasing costs of funerals.

So, what is the solution? A plan which can be used to help pay for funeral costs when you do die, in the form of over 50s life insurance, could be one answer.

How does it work?

The principle is simplicity itself: you pay a fixed monthly premium and, in return, the insurer agrees to pay a lump sum cash benefit to nominated beneficiaries, usually your spouse or family member, upon the insured’s death.

Policies start from as little as £4 a month and are fixed throughout the policy term, meaning you can budget accordingly.

Over 50 life insurance is whole of life insurance, meaning that the benefits are paid out when you die, no matter when this is. It is distinct from term life insurance, therefore, which pays out only if you die within a prescribed number of years – the insurance term.

By the same token, of course, it means that over 50s life insurance might involve payment of the agreed premiums for the remainder of your life – although the need for payment typically ceases once you have reached your 90th birthday with some providers.

Over 50s life insurance may take a number of different forms, with some offering more attractive policy features and benefits than others, so you might want to check out the comparisons we maintain here at Over50Choices with respect to a wide range of products.

Advantages

A common advantage with this type of insurance is that, provided you are under the age of 80 (or in some cases, 85) acceptance is guaranteed. This means that if you have a pre-existing medical condition or have been refused life insurance elsewhere, you can still take out the over 50's plan provided you are aged 50plus.

Although over 50s life insurance is commonly advertised as a way of helping with funeral costs, the benefits are not limited to such a purpose.

You might use the policy, for example:

to lighten the financial burden for your surviving relatives by ensuring that credit cards and other borrowing may be settled

it might be left as a financial legacy for your children or other dependents

the proceeds might be written into a trust fund with a view to managing and reducing inheritance tax liabilities.

Points to bear in mind

When arranging an over 50s life insurance plan, your commitment is long-term and if the payment of monthly premiums is halted, the policy comes to an end, without any cash-in value. (Although a new breed plan has recently come to market that will retain some benefits should you stop paying, so you should always check the details).

Because it is a long-term arrangement, the effects of inflation may reduce the effective purchasing power (compared to today’s prices) when the benefits are finally paid out.

Since you are likely to be paying the monthly premiums for many years to come, it is possible that the assured cash benefits eventually paid out amount to less than the total amount in premiums you have contributed over the whole life of the policy. So do check out how much you will pay in should you reach 90 (or the age at which you can stop making payments) compared to how much your policy will pay out.

Finally, if you are in good health and have not been refused life insurance elsewhere, you may be able to get up to 40% more cover for the same price with a traditional life insurance policy – which, of course, can be used to cover funeral costs too.

If the latter is the case then by comparing quotes using our service here, our team of advisers can help you find the most appropriate plan for you.